NYISO: Decarbonization efforts could be slowed without new transmission

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Dive Brief:

New York's electric system "stands at the cusp of the next evolution," according to a report from the state's grid operator, but without additional transmission capacity the state's decarbonization efforts could face headwinds.

The New York ISO's annual analysis of the state's grid,Power Trends 2019, concludes that without investment to expand the transfer capability of the state's bulk power system, new upstate renewables will face diminishing returns that could foul the state's wholesale energy market.

The ISO also noted in the report that it has initiated the second phase of its 2018-2019 Reliability Planning Process, and is considering a scenario that would retire 3,300 MW of simple-cycle peaking units in New York City and Long Island.

Dive Insight:

New York's wholesale energy markets have been in place for nearly two decades, but the ISO's report warns investment in additional transmission capacity is necessary to keep it operating smoothly.

"Competitive wholesale electricity markets are critical to accomplishing New York’s aggressive policy objectives efficiently and reliably," ISO Interim President and CEO Rob Fernandez said in a statement. The state is aiming for 100% carbon free energy by 2040, which will require the ability to deliver more electricity from renewable generators not located near New York City and other downstate load pockets.

"Nearly 90% of the energy produced upstate already is derived from carbon-free resources," according to the ISO's report. "Because load in the upstate region is not projected to grow, the addition of new renewable resources increasingly displaces other sources of clean generation instead of allowing more renewable resources to reach customers."

Adding more upstate renewables without the capability to move the power downstate will place downward pressure on wholesale energy prices, the ISO noted, which in turn puts upward pressure on the cost of the state’s out-of-market incentive payments.

"This dynamic not only reduces the effectiveness of competitive markets as a mechanism to provide reliable service, it also jeopardizes the economic viability of resources lacking access to out-of market revenues," the grid operator warned. Those resources include generating capacity necessary for reliability, as well as existing renewable resources whose incentive contracts may have expired.

Ultimately, the ISO said in its report, the state's Clean Energy Standard goal of achieving 50% renewable energy generation by 2030 "will be jeopardized because energy delivery from renewable resources to downstate load centers will be constrained."

This is why the state needs market-based incentives for renewables investments and a more robust transmission system, the report finds. Otherwise, said the ISO, state policies could promote a resource mix "where new renewable resources increasingly displace the output from existing renewable or other zero-emitting resources."

The ISO is working with state regulators and other stakeholders on two major transmission expansion efforts: the Western New York and AC Public Policy Transmission projects will move additional clean energy from the western and northern regions of the state to the largest demand centers.

NYISO

The projects were approved last month and will increase Central East transfer capability by at least 350 MW and UPNY/SENY transfer capability by at least 900 MW, according to the ISO. The ability to get emissions-free energy to all parts of the state is essential to the calculations that go into retiring gas-fired turbines.

In February, the New York State Department of Environmental Conservation (DEC) proposed requirements to reduce emissions of smog-forming pollutants from peaking units, including phasing in compliance between 2023 and 2025. The new rule potentially impacts about 3,300 MW of simple-cycle turbines in New York City and Long Island.

The NYISO is developing a Comprehensive Reliability Plan, and in its report said that one scenario will consider the reliability impacts of retiring all of the units impacted by the rule, which would require peaking unit owners to submit compliance plans to the DEC in March 2020.

The draft rule includes a reliability provision, however, that would allow a peaking unit to continue to operate up to two years — with a possible further two-year extension — if it is designated by the ISO or the local transmission owner "as needed to resolve a reliability need until a permanent solution is in place," according to the report.